July 17, 2013 10:53 pm

by Jhoanna Ballaran Reporter
First of three parts

THE National Museum is the country’s caretaker of history, culture, and national heritage.

The museum houses priceless treasures such as the celebrated Spoliarium of Juan Luna, the thousand-year-old manunggul jars, the murals of Carlos “Botong” Francisco once located at the Philippine General Hospital, and many other relics and artworks.

But apparently, the funds for the upkeep and preservation of the national treasures have been squandered on questionable transactions and investments made by the museum’s administrators since 2011.

The Commission on Audit (COA) stumbled on the suspicious accounts when it was poring over the Museum Endowment Fund (MEF) last year.

Under the National Museum Act of 1998, the endowment fund was set up for the museum’s special projects and activities. It is distinct and separate from the museum’s annual budget.

COA documents obtained by The Manila Times indicate that P306,926,248.99 of the MEF which was deposited with the Land Bank of the Philippines (LBP) was transferred to two private banks—Bank of the Philippine Islands (BPI) and Banco de Oro (BDO). The money remains unaccounted for.

In a series of letters to Museum Director Jeremy Barns since February, State Auditor Victoria Yumang demanded that museum officials produce the documents related to the investment, including quarterly and annual reports, and the accounting of the interest earned since it was invested in November 2011.

Barns failed to present the documents, and the COA is asking him to account for the money.

“Due to the failure to comply with the written and oral demands made by this office, we now declare you liable for the unaccounted P306,926,248.99 MEF,” Yumang told Barns in her letter dated June 7. “On your failure to account the supposed investments with the BPI and BDO, we therefore demand the restitution of the amount.”

The fund comes from the Philippine Amusement and Gaming Corp. (Pagcor) and Philippine Charity Sweepstakes Office (PCSO) who each give P250 million from their annual net earnings.

Pagcor completed its P250 million remittance in March 2012 after it started remitting in 2002, while PCSO has given P45 million since it started the allocation in 2004.

Non-compliant
The MEF can be invested primarily in government assets and bonds, but only the interest earned can be spent. If the Museum’s Board of Trustees (BOT) decides to transfer the MEF to a private bank, it must first secure authorization from the Department of Finance (DOF) and come up with regular monthly, quarterly and annual performance reports to the accounting section.

These accounting regulations are meant not only to ensure transparency in handling government funds, but also as a deterrent to graft and corruption.

The museum apparently ignored the rules. In an audit observation memorandum (AOM) dated June 7, COA stated that the uncertified copy of investment management agreements (IMA) were only furnished by the Director’s office to the Museum’s records office last March 14, or one year and four months later.

This breaks the standard operating procedure of furnishing copies of documents to the concerned offices of the museum five days after an investment is made.

In her letter, Yumang noted that the trustees board, chaired by Ramon del Rosario Jr., “failed to render the periodic reports on the status of the MEF required under section 23, R.A. 8492” since November 2011. It failed to furnish reports to the museum’s accounting and records section, and even other government agencies including COA.

The museum officials also did not ask the DOF’s permission before investing the P306 million with the two private banks.

Mishandled?
It also failed to install checks and balances in the handling of the fund. Instead of assigning the cashier or the accountant to take charge of the MEF as was previously practiced when the money was under the LBP account, it was personally handled by Barns.

This can be gleaned from the nine memorandums Barns issued from 2011 to chief administrative officer Dionisio Pangilinan, asking Pangilinan to prepare manager’s checks for deposit in the BPI and BDO accounts.

Barns indicated in the memos that “once prepared, I will deliver the said checks to the bankers concerned.”

There was no record to show that an administrative personnel of the museum accompanied Barns when he made the bank transactions. It was Barns who “personally delivers, transacts, and handles the investment with BDO and BPI and at the same time controls the investment records under his custody,” COA said.

According to the AOM, “the Director [Barns] made personal representation with the private bank officials purportedly in behalf of the BOT Executive Committee.”

“Considering that cash or cash in bank accounts are the most susceptible to fraud or embezzlement, there is even a heightened need for transparency and not sole control by one person only of the whole transaction.

“It must be noted that the MEF is not a private fund, this is a government fund intended for specific purpose though the BOT was authorized to direct the investment of said fund […] however, the usual accounting and auditing rules and regulations must not be ignored,” COA indicated.

Until now, Barns has not been able to forward copies of the IMA and reports to the museum’s cashier and accounting offices, or the COA.

Meddled?
R.A. 8492, which established the National Museum, clearly states that only the interest earned from the MEF “may be expended for the special projects and programs.” However, the museum’s officials, under Barns’ representation, also invested the fund’s earnings when it was still in LBP to BPI and BDO.

From October 7, 2002 to August 31, 2011, the MEF earned P19,945,949.77 of which P7.75 million was deposited to the museum’s special projects account in 2010 and 2011. To date, the balance of the special projects account stands at P269,700.78.

If one is going to do the math, Pagcor and PCSO remitted a total of P295 million in a period of 12 years—but the invested amount is P306,926,248.99, or an excess of “P11,296,258.99, representing interest earned from previous investments with the LBP,” Yumang wrote in the AOM.

The accrued interest, instead of being spent on the museum’s projects, was invested in private banks, without following the standard operating procedure for handling government funds.

“This is a violation of Section 23, R.A. 8492 which requires the BOT to determine the annual transfers from the MEF interest earned to the Museum projects account,” COA said.

The Manila Times tried to contact Barns through the Director’s Office but he could not be reached.